Where we are, (at least for now… )

Alastair Crooke, Comment, Conflicts Forum, 6 January 2017

Professor Peter Mair, not so long ago, wrote a book entitled Ruling the Void. The void was the empty space – ‘the void’ - between Britain’s New Labour and its constituency: its electoral base. After Labour’s fourth consecutive general election defeat, its new leader (1992), John Smith, determined that if Labour was ever to take office again, it must win over the American Establishment – and to do so, it should woo Wall Street, and the City of London in particular.  Labour’s Charm offensive was initiated – and then fully embraced by Tony Blair from 1994 (on Smith’s unexpected death).  This shift towards American conservative power centres was called ‘the Third Way’ - implying a data-dependent, model-driven, kind of technocratic politics (most evident in the Central Bankers’ faux ‘data dependency’ modus operandi for managing the economy).

The Third Way ‘triangulated’ itself to lie at a supposed apolitical lull between ‘extremist’ poles. New Labour leaders bragged that this technocratic calm of the mid-point ‘eye’ put them ‘above stormy politics’. Blair claimed later – as PM – that he was never really ‘in politics’, at all.

From whence did all this come? Was it Smith’s or Blair’s construct, or did the Third Way notion emerge from Team Clinton (Bill Clinton took office in 1993).  It’s a moot point, but probably the latter.

In any event, Mair’s key insight was the ‘the void’: the élites (British, European – and now American) had come to despise their own grass roots (their ‘deplorables’). And the party grass-roots, in their turn, equally had become contemptuous of their deracinated ‘Davos’ élites, who regarded state sovereignty as an irksome hindrance to jet-setting, cosmopolitan and business life-style. They were ‘above it all’ – in a cosmopolitan, urban, bubble of their own, severed from their national roots. This, in gist, is a paraphrase of Mair’s detailed work.

As Labour woke up to discover that its old bases in Scotland and in the former British manufacturing heartland had evaporated, so, now, it has been the US Democrats' turn. Both had played the ‘diversity card’ and cultivated a politics of multiculturalism and identity victims. But after 8 November 2016, the Democrats woke up to observe the scope and extent of their disaster: the party had been hollowed out. It had lost its old bases in the South and in the Rust Belt. It had gone from holding national legislative majorities, to becoming a party of coastal urban élites, angry college millennials, and minority coalitions.

This is the first of three ‘long cycles’ – the politics of the New World Order - that is now exhausting itself, and is pivoting off, in some new direction (yet to be fully perceived). It seems, as evidenced from the emotional, angry riposte to Trump and Brexit, as if somehow it is being experienced by many as though it is ‘modernity’ itself, that is ‘going down’.  As if the whole post-WW2, post-Cold War, ‘End of History’ meme, in which the New World Order (NWO), the New American Century, financialised globalism and global convergence on liberal values and liberal trade - that seemed, as it were, ordained, inevitable, and universally beneficial - was overturned in an ‘ugly result’ on 8 November. Perhaps it was.

Both the Brexit referendum and the US Presidential election seemed to suggest however, that a weighty portion of American and European electorates have indeed tired of this NWO: tired of ‘experts’ who told people that globalism was in their interest, and that ‘austerity’ was but a bracing tonic. Tired of stagnant economies, and tired of being told they were in ‘recoveries’, when they weren’t. Soros-style activism (Change.com, MoveOn.com, and Avaaz.com), it seems, had pushed identity activism to the limit, taking with them, the Centre-Left parties - to the point of losing the very ability to converse with much of the non-urban elite populations. Simply, it became harder for such parties, too, to keep the banner of diversity flying, and borders liberal, as terrorist incidents across the world, relentlessly accumulated.

Or, so it seems.

The New World Order ‘coalition’, however, has refused to accept the verdict. They do not believe that it is over, and nor do they believe that the seeming revolt against them represents any legitimate point of view, or even that its opponents have an argument of some sort. Rather they see it as an eruption of base prejudices of the worst sort. They do not accept that the status quo ante has been irretrievably lost.  Rather than introspect on their situation, they prefer to blame Russia and ‘fake news sites’.  This psychological reaction of emotional denial is hugely important.

Rather than gracefully yield on the status quo ante, it signals that the ‘Trump opposition’ hope to restore it.  To do that though, evidently Trump must fail – or rather be made to fail – and spectacularly so.  Most of the analysis, up to now, has centred on Mr Trump’s prospective policies.  Of course the nature and substance of his policies are highly important, but perhaps more important geo-strategically, will be the interaction between these two dynamics: the ideas and policies themselves (as they emerge) – and, on the other side, the choice of ‘wrench’ to be inserted between the spokes of Trump’s Administrative wheels, by the powerful coalition opposing him and counting on his failure.

This clash in, and of itself, has the potential to bring US policy-making to a halt, or to render it incoherent and impotent. It certainly carries a germ of possible financial crisis (whether or not the ‘wrench’ is to be inserted there in the financial system). But it also clearly carries the potential for greater popular polarisation (as if the existing divisions are not bitter enough). Trump’s success or failure will have global import.  And that success or failure, ultimately may rest on the extent to which Mr Trump can get a grip of his party and the instruments of state – and reach an accord with President Putin too.

Why should the accord with Russia be so crucial? The answer is that the Establishment well know that the New World Order has been eroding steadily for some time. The 50s and the 60s were America’s ‘Hay Days’.  But those are long gone times. That golden era effectively started to unravel somewhat in the 70’s, but as James Kunstler points out, somewhat colourfully – but not inaccurately:

“America recovered from the financial disorder of the 1970s not because of the charms of ‘Reaganomics’ but for the simple reason that the last giant finds of oil with greater than 30-to-one energy-return-on-investment came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. That allowed the USA and the West generally to extend the techno-industrial fiesta another twenty years. As that bounty tapered down around the year 2000, the system wobbled again, and the viziers of the Fed ramped up their magical operations, led by the Grand Vizier (or “Maestro”) Alan Greenspan, who worked the control rods of interest rates as though the financial system were a great nuclear powered pipe organ that could be revved up and tamped down by a wondrous Fed control panel. This period of Fed spell-casting was characterized by ever more systemically complex finance, growing systemic fragility, pervasive institutionalized accounting fraud, and ever-greater bubbles and busts.

Debt was the meat-and-potatoes of the Fed’s wizardry, but the “secret sauce” of Fed magic was fraud, in the form of market interventions, manipulations, regulatory negligence, and just plain systematic lying about the numbers that defined the economy… Under Bernanke’s successor, [Janet Yellen], the emphasis in Fed policy has been an elaborate game of “data-dependent” foot-dragging — a lot of talk with no action — with the data itself largely fraudulent, especially the easily gamed employment and GDP numbers that supposedly determine the rise or fall of interest rate policy. In short, the racketeering continues while the authorities quail in the face of accumulated and now inescapable debt quandaries ever more certain to end in systemic collapse.”

It is Peter Mair’s Ruling the Void again: Greenspan, Blair and Clinton were all of an era. The notion was that managing an economy (or politics for that matter, which was of the same substance, in their view) was a technocratic issue – above politics – best left to academic experts with their models, and their algorithmic soothsaying. Whereas, New Labour and the Democrats, lost their connection with their electoral bases as a consequence: the Federal Reserve has lost its connection, and understanding of how a real economy works.  Negative interest rates (just one example, among many) may appear to work in realms of academic mathematic modeling, but negative rates do not work in practice – for good reasons of simple human psychology. In fact, they have proved to be damaging.  The consequences are similar to those that have afflicted New Labour and the Democrats: the Fed elites now are held in disdain, and viewed as living in a bubble of their own making, severed from reality.

The Trump opposition coalition knows it is on weak ground here, in proposing a return to a monetary status quo ante, which has so clearly reached the end of its road.  Mainstream America too, has started to waken-up to the fact that the Fed magic is no more real than any other of the extravagant claims put forward for ‘Third Way’ politics. Some commentators have been suggesting that it is precisely here - with a precarious financial system - that Trump most easily can be tripped up – and point to the Fed’s intention to raise interest rates three times this year – irrespective, of its vaunted dependency on data (that would not seem to justify such rises). Maybe. But maybe also the Trump opposition know that they have vastly more to loose than ‘the deplorables’ in any financial crisis - even if it is true that Trump is highly vulnerable to an attack using rising interest rates.  The ‘deplorables’ have almost no skin in the financial markets.  Perhaps this why we are seeing such a migration from Goldman Sachs into the Trump Team: they may figure it is better to work with Trump, than against him.

This – the weakening western economic situation, and America’s slipping hold over global governance (financial and military) – represents the second of the three long-term cycles which is turning, and seems poised to slip off in another direction.  The US (and Europe) have been haemorrhaging capital expenditure, productivity and jobs to overseas for a long time now. For so long, that (in Kunstler’s words again), “it’s not like we’re going to reactivate some mothballed sleeping giant of productive capacity”:

“New state-of-the-art factories would require an Everest of private capital investment that is simply impossible to manifest in a system that is already leveraged up to its eyeballs. Even if we tried to accomplish it via some kind of main force government central planning and financing — going full-Soviet — there is no conceivable way to raise (borrow) the “money” without altogether destroying the value of our money (inflation), and the banking system with it … [and] If by some magic any new industrial capacity were built, much of the work in it would be performed by robotics, not brawny men in blue shirts, and certainly not at the equivalent of the old United Auto Workers $35-an-hour assembly line wage.”

In short, there is no easy way back to the status quo ante of the American 21st Century - by this route. This cycle has already turned – it may be mitigated somewhat by Trump's policies, but hardly restored to virile life.  There are just too many headwinds of a systemic type.

And just as the western economic strength has been melting away – less noticeably perhaps, but just as significantly – so too has been its military muscle. The US has stayed with expensive, over complex offensive capacity, whereas Russia, China and Iran have developed relatively cheap and effective defensive capacity. Federico Pieraccini describes it thus:

“In this sense, among the greatest weapons these three recalcitrant countries possess are anti-ship, anti-aircraft and anti-ballistic systems. To put things simply, it is enough to note that Russian weapons systems such as the S-300 and S-400 air-defense systems (the S-500 will be operational in 2017) are now being adopted by China and Iran with variations developed locally. Increasingly we are witnessing an open transfer of technology to continue the work of denying (A2/AD) physical and cyberspace freedom to the United States. Stealth aircraft, carrier strike groups, ICBMs and cruise missiles are experiencing a difficult time in such an environment, finding themselves opposed by the formidable defense systems the Russians, Iranians and Chinese are presenting. The cost of an anti-ship missile fired from the Chinese coast is considerably lower than the tens of billions of dollars needed to build an aircraft carrier. This paradigm of cost and efficiency is what has shaped the military spending of China, Russia and Iran. Going toe to toe with the United States without being forced to close a huge military gap is the only viable way to achieve immediate tangible benefits of deterrence and thereby block American expansionist ambitions.”

Establishment insiders no doubt have seen this coming for some time: the Establishment will have been very aware of its eroding power, its precarious overload of debt, as well as the ‘system’s top-heaviness, and befogging complexity. In the end, a huge amount of attention and energy are spent now simply in keeping the wheels turning, and the levers clicking up and down on the cogwheels of a perpetual motion machine that is going nowhere. The point is to keep it aloft, for fear that a moment’s inattention to its maintenance would have it crash down to earth.

How to change the seemingly irreversible erosion of American standing, and restore the New World Order in such inauspicious circumstances? Or, in short, how to ‘undo’ Trump? Well, one way would be to deliver an audacious, overwhelming, and psychologically-searing display of strength that simply, and at a stroke, awes the world, and whose shock overturns the present paradigm of American decline.

Cornering Russia, provoking it into some ill-considered response – with a view, ultimately, to knock it back into the Yeltsin era, could be viewed as sending a clear global message that America unquestionably remains ‘top dog’: cornering Trump on the Russian ‘interference’ in US elections; leaving Trump no exit but to escalate political tensions -- tensions that then can be ‘worked-up’ by the Establishment’s protégés on the ground into demanding further US responses to Russian ‘aggression’.  The signs of such a strategy are already very clear to see (i.e. the expulsion of Russian diplomats). Hyping the Russia ‘threat’ both keeps open the prospect of ‘the return’ for the Democrats (since it was allegedly only the Russian ‘thumb’ on the electoral scales that ‘unfairly robbed’ Mrs Clinton of office) - and yet, at the same time, prepares the ground for a dramatic return of American global primacy.

This is why Trump’s Presidency – in part – hangs on whether he can purge the politicised US (and Allied) intelligence; stamp his authority on Congress, and reach an accord with President Putin. This represents the touchstone for the year 2017. It is set to be an epic power struggle, whose outcome will affect us all.

What are the wider implications?  The Mair thesis, of course, applies not just to New Labour or the Democrats.  The same processes are at work throughout Europe – and all of Europe’s Centre-Left parties will be affected to one extent or another.  There will be also three major European elections to look forward to in 2017: the Netherlands and France in the Spring, and Germany in the autumn.  Europe too, is on the hook. The outcomes may re-define Europe – or not. And so is much of the Middle East on the hook.  If all that, to which ‘modernity’ gives a semblance of solidity, starts to melt in the air, because these American conflicts roil markets (Kunstler notes), North Africa and the Gulf states are the most vulnerable, because “these are geographically among the places least well endowed for supporting the swollen populations they acquired over the past two hundred years … [Many] are deserts artificially supported by the perquisites of Modernity: cheap energy, fertilizers made from that, irrigation,  money derived from it, and continuing life-support subsidies from even wealthier modern nations outside the region … The main point is that [it was] Modernity [that] inflated them, and now [if] Modernity is [melting into the air] they’re either going to pop, or deflate.”

And the third, and last, of the structural ‘cycles’, which we sense is reaching also its point of reversal is the ‘way in which we think’. There is no doubt that Trump’s electoral victory has unleashed pent up, tectonic energies.  Some of these may prove to be quite noxious. One such, might be whether the new European right-wing leaders will actually move as far as mass deportations.  Maybe.  One cannot be sure. But equally, Trump’s victory – like it or not – has cracked the sealed retort of a certain way of thinking.  It may yet prove liberating in terms of ideas (in spite of the prevailing skepticism):,perhaps in terms of how our economies can be put on a more secure monetary footing.  And, at least the airlessness of three decades of stale foreign policy may be blown away in the process (albeit at the cost of an increase in internal acrimoniousness).  It is too early to say whether Trump is setting a new era, or whether he is but the ‘pilot project’ of something still to unfold.  In any event, 2017 surely will be interesting – and turbulent, too.